Madoff recoveries: Irving Picard’s feats are starting to look almost as amazing as Bernie Madoff’s. The trustee appointed to clean up after the imprisoned Ponzi scheme mastermind is now about half way to recovering the $20 billion or so of actual cash lost by the victims. Recouping the rest doesn’t look entirely out of reach, either.
Picard just scored his biggest coup. When billionaire Jeffry Picower was first sued for his whopping investment gains with Madoff, a longtime friend, he said in court papers the allegations were “unsupported by facts or logic”. But Picower died at 67, a few months after Picard came after him, and his estate agreed last Friday to return $7.2 billion. Including the sale of Madoff’s ill-gotten trinkets, other clawbacks and a settlement with Swiss private bank Union Bancaire Privee, the pot now stands at nearly $10 billion.
Picard may have unearthed the easiest spoils, but his global scavenger hunt is only just beginning. In the last month alone, as his deadline for filing lawsuits approached, the trustee added Austrian banker Sonja Kohn, HSBC, JPMorgan and UBS to a list of targets that already included funds in the Cayman Islands, a dead Hollywood money manager and a bank in Argentina. Picard would need to be awarded or settle for about 25 cents on the dollar from the remaining $40 billion of lawsuits to make up for all the estimated losses.
It is a stretch to think Picard will get anything close to $5 billion from Kohn, characterised in the trustee’s nearly $20 billion suit as Madoff’s “criminal soul mate” in perpetrating his fraud - allegations denied by an Austrian bank connected with Kohn and also named in the suit. Moreover, Picard’s allegations against the big global banks look less clear-cut than was the case in some of his early settlements.
Even if Picard falls short, though, he looks on pace to do right by Madoff victims. Other losing investors don’t usually fare nearly so well. According to a Moody’s analysis of 20 years of prepackaged bankruptcies, creditors recovered about 55 percent of their money. The rate was even lower for regular Chapter 11 cases. When it was revealed, Madoff’s swindle looked an unparalleled if ugly feat of fraud. Picard might yet set an impressive standard in return.
